UCSB economics professor discusses future of extended UI
Extended unemployment benefits have “turned off” in 33 states and territories, and while California is not one of those states, it soon will be.
The California Policy Lab — a nonpartisan research institute — released an analysis last week finding that the reason these extended unemployment benefits have been turned off is not due to an improving labor market, but actually an incomplete way of measuring unemployment claims that does not include the long-term unemployed.
Lawmakers are calling for reform of the federal-state extended benefits trigger system, and Dr. Peter Rupert, an economics professor at UCSB and the director of UCSB’s Economic Forecast Project, said that if times were normal, this conversation likely wouldn’t be happening.
“Every state is different and manages their own unemployment insurance system,” he told the News-Press. “However, it’s one of those things that in normal times, it works pretty well. In times like the Great Recession and the pandemic — when things go completely haywire — the federal government has to come in and help things out.”
Santa Barbara County’s current unemployment rate sits at a little over 7%, cutting the rate in half from what it was at the peak of the pandemic. Dr. Rupert said things are trending in a positive direction, and that in January of 2020, 10,000 county residents were unemployed, and the number is around 16,000 now.
He added that, after the Great Recession, it took eight years for the unemployment rate to return to where it was beforehand.
In its analysis, the California Policy Lab found that in many states, the extra weeks of extended unemployment benefits turned off despite historically high levels of unemployment. This means 300,000 Americans who have been receiving UI benefits are seeing their extended benefits cut short.
“The COVID-19 pandemic has up-ended a lot of ways people have traditionally thought about unemployment insurance benefits, like who should be eligible and for how long, and laid bare important holes in our social safety net,” Alex Bell, a postdoctoral scholar at the California Policy Lab and co-author of the report, said in a press release. “The automatic extended benefits program provides not only needed income to workers, but also stabilization to the economy. If these triggers were updated to count all people receiving unemployment benefits, then it would mean benefits would be available to impacted workers for longer durations, which seems sensible during times of extended job losses like the pandemic. Unfortunately, in state after state we see that the counter-intuitive design of the program’s trigger system is causing the exact opposite to happen.”
California, Massachusetts, New Mexico, Nevada and New York are likely to trigger off of the automatic extended benefits program soon, and all five states have seen more than 30% of claimants in recent weeks collect benefits under the program.
“What’s going to happen is a lot of people are going to be out of benefits,” Dr. Rupert said.
However, the economist pointed out that there’s multiple angles to this issue. This includes restaurant owners, who have had to cancel reservations, and hotel owners, who have had to shut down rooms, because they can’t get any labor because some individuals are making more money from their unemployment benefits than they would in the workforce. In addition, he said it would be impossible to send individuals out to ask these unemployed individuals if they wanted to work or not.
“There’s some people who can’t get jobs, so obviously we have to help them, but it’s really hard to do this on a case-by-case system,” Dr. Rupert said. “If you’re giving people a lot of money to stay away from working, they’re going to stay away from working.”
Back in March, local restaurant owner Aaron Petersen mentioned a similar problem he was experiencing. When he reopened CHOMP on the Rocks! at the Santa Barbara Harbor after being closed for two months, he could only get six of his 14 cooks to come back to work. Dr. Rupert said Sherry Villanueva, an owner of numerous restaurants in the Santa Barbara area, told him she’s experiencing the same shortage.
“I let them go because they didn’t want to come back,” Mr. Petersen told the News-Press last month. “I’m not saying it was unemployment, but it was unemployment …They (the employees’ COVID concerns) are legitimate, maybe, but the point is I can’t get the cooks to come back. Us restaurants are fighting over the few cooks that did come back willingly.”
Dr. Rupert said that coasting on unemployment benefits is risky because employers will likely be able to fill the positions eventually.
“These kinds of policies have good effects and bad effects and unintended consequences,” he said. “Basically, you’ve got unemployment insurance for 26 weeks and the government increases it to 34 or 56 and then they keep increasing it. You might as well go surfing.
“Once the benefits get turned off, those people who really can’t find jobs, well, they’re out of benefits. There’s just no doubt about it.”
However, the professor said that with the COVID-19 vaccines and things opening back up again, more jobs will open up for the people having a hard time finding a job. Until then, he said the federal government is already in debt in the trillions and it’s not clear if any more recovery packages are coming. He also doesn’t think the state can afford to provide any more financial assistance.
“I know that a lot of people in the leisure-hospitality sector, not only are they getting unemployment insurance, a lot of them are worried about the volatility of the industry so they left the industry,” Dr. Rupert said. “I think it’s going to take a while for the structure to change, but everything I see is moving in a positive direction.”